Fleeing Pilots, Spare Part Crisis, Grounded Planes
Akasa Air has moved the Bombay High Court against more than 40 pilots for breach of contract and Indigo Airlines is adding to its fleet to make up for aircraft which are grounded thanks due to parts problem with its Pratt & Whitney engines
Our Top Reports For Today
- [00:55] Indian stockmarkets continue their run, on course for best since October 2007.
- [04:12] Oil prices trade high, diesel is in short supply.
- [06:39] Fleeing pilots, spare part crisis, grounded planes, Indian aviation is buzzing with action again with Kapil Kaul
- [14:05] Live events are taking centre stage globally and in India, will the momentum hold with V G Jairam
- [26:37] And hmm. State Bank of India will give you chocolates if it thinks you will default.
NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.
---
Markets
Yes, despite all the fear of heights, the Indian stock markets are continuing their run.
Last week, the BSE benchmark jumped 1,239.72 points rallying for the 11th day running on Friday. At this rate, the Indian markets are on track for the best performance since October 2007.
The combined market valuation of nine of the top-10 most valued firms rallied by Rs 1,80,788 crore last week, with Tata Consultancy Services (TCS) emerging as the biggest gainer.
On Friday specifically, The Sensex was up 319.63 points to a record close of 67,838. The Nifty50 closed 89 points higher at 20,192. Both indices hit record highs during the day.
A glance at what is happening internationally that obviously affects what is happening here..
Foreign holdings in China’s equities and debt have fallen by $188 billion or 17%, from a December-2021 peak through the end of June this year, according to Bloomberg calculations based on the latest data from the central bank. That’s before onshore shares witnessed a record $12 billion outflow in August alone.
To put things in a wider Asian context, the MSCI China Index is down around 7% in 2023, and poised for a third straight year of losses that will mark the longest losing streak in over two decades. On the other hand, the broader MSCI Emerging Markets Index is up 3% as investors chase returns in other places like India and parts of Latin America, says Bloomberg.
The moral of the story is obviously that this is a substantially liquidity driven market, including back home.
In India of course we are seeing massive liquidity injections from domestic investors though foreign portfolio investors are right now selling.
Speaking of liquidity, driving around central and south Mumbai on Saturday, I noticed apart from the giant Ganesh idols moving on to their respective pandals, a sight to see in itself, at least two hoardings for IPOs.
Hoardings are of course a Mumbai thing and there are more of them here perhaps than any other city in the country, to its detriment of course.
But I don’t recall seeing an IPO hoarding for many years if not decades. Maybe they popped up somewhere in between but I don’t remember. Maybe you can. And the companies concerned were not known to me, except one which was a ticket booking website.
Am assuming if there are IPO hoardings in Mumbai, they are in other cities too.
This to me does suggest an overheated market and also the fact that advertising of this nature suggests you are competing against others trying to raise money too. All I can say is be cautious and do your research. Many of these IPO rushes have not ended well for investors.
And there are 10 IPOs expected this week and 5 new listings, reports say. They range from a saree seller to a masala company to jewellery apart from metals and wires. In many cases, there is substantial promoter offloading happening. A figure I quoted earlier was that promotor offloading this year has already crossed Rs 80,000 crore, twice that of 2022.
And incidentally, we have been fretting about small cap stocks going gangbusters and now of course their correction, only somewhat though.
Turns out we are not alone. The rest of Asia too has been experiencing a similar exuberance. The MSCI Emerging Markets Small Cap Index, which includes 1,905 stocks with an average market value of $583 million, is up 14.7% so far this year, compared to a 2.5% gain in its large-cap counterpart, where the average size is $7.9 billion, says Bloomberg.
Korea, Taiwan and India have of course led this small cap rally across the region. Remember brokerage Kotak Securities said many of these small and mid cap stocks were extremely dicey to put it mildly.
Oil
Sticking to overheated markets and switching to commodities, crude as we discussed here earlier has now crossed the $90 per barrel mark and jumped more than 30% since mid-June with $100 a barrel predictions floating freely.
And it could get worse. Saudi Arabia and Russia have turned down the taps on production of crudes that are richer in diesel. On Sept. 5, both nations — leaders in the OPEC+ alliance — announced they would prolong those curbs through the year-end, a period in which demand for the fuel usually picks up.
“We’re at risk of seeing continued tightness in the market, especially for distillates, coming into the winter months,” said Toril Bosoni, head of the oil market division at the International Energy Agency, referring to the category of fuel that includes diesel. “Refineries are struggling to keep up.”
There’s also been pressure on them to make other products instead like jet fuel and gasoline, where demand has rebounded hard, according to Callum Bruce, an analyst at Goldman Sachs Group Inc.
PM Vishwakarma
In a strong skills push, Prime Minister Narendra Modi on Sunday launched the 'PM Vishwakarma' scheme on the occasion of 'Vishwakarma Jayanti', under which traditional craftsmen and artisans will be provided loan assistance at a minimal interest rate without the need for collateral.
The scheme has a financial outlay of Rs 13,000 crore for a period of five years and hopes to benefit about 3 million of traditional artisans and craftsmen, including weavers, goldsmiths, blacksmiths, laundry workers, and barbers.
The goal of the scheme is to enhance the accessibility and quality of products and services offered by traditional artisans and craftsmen.
The scheme offers collateral-free enterprise development loans of Rs 1 lakh (first tranche for 18 months repayment) and Rs 2 lakh (second tranche for 30 months repayment).
Action Again In The Aviation Market
It was almost too quiet for too long.
The one year old Akasa Air has moved the Bombay High Court against more than 40 pilots for breach of contract, alleging that they quit the carrier without serving the regulation six-month notice period.
Over the past few weeks, Akasa Air was forced to cancel a number of its flights due to such resignations. Most of these pilots are understood to have accepted offers from Air India Express, which, like Akasa Air, operates Boeing 737 family of aircraft, the Indian Express reported.
The airline has also sought crores compensation from each pilot for loss of operational profits and damage to its reputation due to their sudden exit.
Elsewhere, Indigo Airlines is now leasing 11 aircraft and adding to its fleet to make up for aircraft which are grounded thanks to an ongoing parts problem with its Pratt & Whitney engines mounted on Airbus A320 Neo.
Over 130 aircraft belonging to different airlines are still grounded across Indian airports, including GoAir which is yet to resume flying after it ceased operations in May.
Fares of course have eased off the summer highs but could pick up again.
Where will demand and supply stand in coming months and how are airlines prepared for the next surge?
I reached out to Kapil Kaul, of CAPA Aviation and began by asking him how we were seeing the latest Indigo Announcement to wet lease aircraft.
---
Live Entertainment
In its global entertainment and media outlook for 2023-27, consulting firm PWC had predicted that live events and entertainment would outperform the E&M industry at large.
Taking into account all live event sub-sectors in the consumer space, PWC predicted a few months ago that pre pandemic levels would be touched in 2024 with revenues at $69 billion, from around $67 billion in 2019.
Moreover, live experience would grow at 9.6% CAGR, four times the 2.4% CAGR predicted for overall consumer revenue.
The month of April 2023 alone saw events in Tokyo including concerts by Bob Dylan, Eric Clapton and leading local punk band the Starbems.
And there are venues. PWC notes the inauguration of the Nita Mukesh Ambani Cultural Centre in Mumbai, a world class multidisciplinary cultural space.
Even if you are not a Taylor Swift fan - the word is Swiftie - you would have noted the utter frenzy that has erupted worldwide for fans to catch her in person.
Her Eras Tour that started in march and has paused last month is projected to gross $2.2 billion in North American ticket sales alone and Fortune magazine has said that if concert-goers continue spending at the current rate, the Eras Tour could generate $4.6 billion in consumer spending in the US alone.
Tickets for her shows in Asia next year are obviously sold out.
Back home, India is seeing an uptick in live events, ranging from the big bang Lollapalooza India show in Mumbai in January this year which had the well known Imagine Dragons in attendance apart from other well known international names.
Elsewhere, there was Shakti of the Zakir Hussain and John Mclaughlin fame which reunited and kicked off a global tour from Mumbai a few months ago. And then of course the Mahindra Blues which Mumbai folks are familiar with.
Interestingly, more events are popping up beyond Mumbai, Bangalore and Delhi, traditional venues and beginning to spread across the country.
I caught up with VG Jairam Founder Hyperlink Brand Solutions organiser for Shakti and Mahindra Blues and an upcoming Independence Rock concert in Mumbai, another event that hopes to capitalise on nostalgia to get a sense on where the live entertainment industry was going in India.
I began by asking him whether he felt live events were seeing more action than before ?
---
Speaking of live events, India has another giant convention and exhibition centre at Dwarka in Delhi called Yashobhoomi inaugurated on Sunday by Prime Minister Narendra Modi, in addition to the Bharat Mandapam at Pragati Maidan, the venue of the G20 Summit.
Both venues are pitched to attract conference tourism, something that India is weak in thanks to weak infrastructure.
With a large, modern airport Delhi is clearly stealing a march ahead in this regard at least compared to most other Indian cities and now has, quite sadly, left Mumbai far behind. Sometimes I even wonder if anyone cares anymore.
---
And before I go, we spoke of live entertainment, which is perhaps amongst the most measurable of entertainment segments along with box office of course.
Speaking of measurement, Nielsen, the global media ratings giant, has a new CEO, Karthik Rao, a Loyola College Chennai graduate. Rao is a 23-year Nielsen veteran who most recently served as CEO of its audience measurement unit.
These are tough times for Nielsen which faces increased competition and a rapidly shifting media landscape that has made measurement methodologies more complex, reports the Wall Street Journal. The shift toward streaming services has prompted some ad buyers and ad sellers to look to alternative measurement companies, says the WSJ.
Advertisers everywhere depend on ratings from agencies like Nielsen before deciding where their ad dollars go, worldwide.
And Hmm..State Bank Of India Will Give Chocolates To Potential Defaulters
India’s largest lender State Bank of India says it will send a pack of chocolates to retail borrowers who are likely to default on monthly instalments.
According to the bank, it has been found that a borrower who is planning to default will not answer a reminder call from the bank. So the best way is to meet them at their homes unannounced.
The idea is from an enthusiastic fintech company because SBI says as much but refused to name them. How interesting.
SBI's retail loan book grew over 16 per cent to Rs 12,04,279 crore in the June 2023 quarter making it the largest asset class for the lender whose total book stood at Rs 33,03,731 crore, growing at 13.9 percent on-year.
"With two fintechs which use artificial intelligence, we are piloting a novel way of reminding our retail borrowers of their repayment obligations. While one is doing conciliation with borrowers, the other is alerting us on the propensity of a borrower to default. And to such borrowers who are likely to default, the representatives from this fintech will visit them, carrying a pack of chocolates for each of them, and remind them of the forthcoming EMIs," Ashwini Kumar Tewari, managing director in-charge of risk, compliance and stressed assets at SBI, told wire services over the weekend.
I am actually trying to picture the scene in parliament.
Honourable Finance Minister, what was the banking sector doing when they learned that loan defaults were rising. “Distributing chocolates to the borrowers, respected minister.”
On that note, I hope you or I do not receive chocolates from our lenders and you have a great week ahead.
